EUROPEAN FX UPDATE: USD on the backfoot vs. peers, EUR shrugs of French drama

USD: DXY -0.2%; 106.14

• USD remains on the backfoot vs. peers following yesterday's ISM-induced move in yields. Commentary from Fed Chair Powell who noted that the Fed can afford to be cautious in finding neutral failed to cause a stir in markets. Today's US Calendar is a lighter one with US challenger layoffs and Fed's Barkin on deck. Tomorrow's NFP release looms large. DXY briefly slipped below yesterday's 106.09 low. The next target comes via the 106 mark; Monday's low sits @ 105.78.

EUR: EUR/USD +0.2%; 1.0530

• EUR on a firmer footing vs. the USD with not much in the way of follow-through selling from the collapse of the French government (which was widely expected). Focus remains on the next steps and who (if anyone) Macron can appoint as PM. The main kicker is that the 2024 budget will likely be rolled into 2025. From a broader Eurozone perspective, pricing of a 50bps move at next week's ECB meeting continues to be unwound with odds of a 25bps move now @ 86%. EUR/USD has made some progress on a 1.05 handle with the next upside target coming via the 21DMA @ 1.0561.

JPY: USD/JPY -0.2%; 150.25

• JPY is one of the better performers vs. the USD on account of remarks from BoJ dove Nakamura who stated that he is not against a rate hike. Pricing around the December announcement remains particularly choppy. However, odds of an unchanged rate sit @ 62% vs. 42% seen at the start of the week. USD/JPY is currently tucked within Friday's 149.51-151.22 range.

GBP: GBP/USD +0.2%; 1.2729

• GBP firmer vs. the USD for a third session in a row after shrugging off a dovish headline from the FT yesterday about BoE Governor Bailey's view on the rate path (which appeared to in the end be more related to market pricing than his own view). MPC member Greene is due to speak later today. The BoE's DMP (on which it places great weight) saw no follow-through into GBP. Cable has gained a firmer footing on a 1.27 handle and is now eyeing last Friday's high @ 1.2749.

Antipodeans: AUD/USD +0.3%; 0.6446. NZD/USD +0.4%; 0.5873

• Both firmer vs. the USD with slight outperformance in NZD/USD despite a lack of fresh NZ-specific drivers. NZD/USD is currently caged within yesterday's 0.5829-0.5884 range and yet to approach the 0.59 mark. AUD/USD failed to garner much additional support from an improvement in Australian trade and household spending data. AUD/USD currently sits towards the middle of yesterday's 0.6399-0.6488 range.

05 Dec 2024 - 10:20- ForexResearch Sheet- Source: Newsquawk